One Question Interview with Mandeep

August 7th, 2006

Another One Question Interview, this time from Mandeep. Mandeep answered my call the other day for responses to the first question in the One Question Interviews. Mandeep talks about a nasty drawdown that his trading took and how he coped with it. Thanks, Mandeep!

What trading lesson(s) have you learned from the downtrend that started in May?


Before this crash, I mostly traded on swing basis. I would hold a stock for two to three days and make some profit and sell it and watch the stock go even higher. Of course, I would count the money I coulda, shoulda, woulda made. So I got sick of this in the beginning of April and opened two accounts. One with smaller share size and wider stops and one with my usual swing trading. I was up about 10% in the month of April. Well that was just the beginning of the story. I remember telling myself on May 12 that I am a kick ass trader. Only to find out that by June 12 I gave back the 10 and 20 more with interest. For the last month I got so scared that I would sit in front of the monitor, put a trade, and start to shake. I could not trade because I got scared of loosing money and ironically more I tried to avoid losing more I would lose because my stops were to close and got hit about 99% of the time.

Then I realized that I was losing about $300 a day including the commissions because I was trading like a maniac trying to control the market. I did this for 7 days in row. Then I told my self that I am going to make one trade with 100 shares a day with a $3 trailing stop and go to the gym after 11:15. I remember Seykota saying that ticker is your worst enemy. Sure enough I had six positive days in row. I no longer tried to control the market. I defined my loss and stuck to it. One more thing this downturn taught me is that I am much more comfortable with being flat at the end than having an open position.

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